Canadians Hoarding Cash Show ‘Amazing Degree Of Shrewdness': BMO

The bank warned that stashing cash in their mattresses could cost households billions in lost investment returns.

But Bank of Montreal chief economist Doug Porter sees it differently. “Being overweight cash over the past year perhaps indicates an amazing degree of shrewdness among Canadian investors,” he wrote in a client note this week.

Why does Porter believe that? Stocks on the Toronto market are down nearly 2 per cent since the start of the year, and down more than 12 per cent since last February.

If you’re holding cash, you’re up 12 per cent against Canadian stocks over the past year, and up 2 per cent just since the start of January.

What’s more, Porter argues that Canadians’ cash hoard doesn’t actually show people are bailing on equities. The percentage of household assets held in equities and mutual funds was 36.3 per cent in the latest quarter for which there is data, slightly higher than the long-run average of 34.6 per cent, Porter noted. Canadians actually have more money in equities today than they usually do.

“So please spare us the scolding, and trust that the majority of Canadians are doing what is sensible for their personal situation,” Porter concluded.

If households really are holding onto cash out of fear of the markets, they’re simply following the advice of some of the most prominent investors out there.